From Law.com

October 19, 2012

Texas Supreme Court franchise tax decision is not so sweet for Nestle

The Texas Supreme Court today dismissed Nestle USA’s challenge to Texas’ franchise tax, a revenue source that’s been in place in one form or another since 1893. The 7-2 majority decision in In Re Nestle USA notes that the Texas Legislature has restructured the franchise tax several times, drawing various distinctions among taxpayers with adjustments, deductions and exemptions that have become elaborate.

Nestle challenged the franchise tax, arguing that the taxation that's now in place bears no reasonable relationship to its object: the value of the privilege of doing business in Texas, according to the opinion. The company also argued that the tax violates the Texas Constitution’s mandate that taxation shall be equal and uniform, as well as the due process guaranteed by the U.S. Constitution’s 14th Amendment, the opinion notes.

The high court disposed of the case through a petition for mandamus. “We conclude that the petitioner’s challenges are without merit,” wrote Justice Nathan Hecht in the majority opinion, joined by Chief Justice Wallace Jefferson and Justices David Medina, Paul Green, Phil Johnson and Eva Guzman.